EU says it can't guarantee Brexit won't hit financial contracts

LONDON (Reuters) - There is no guarantee that Brexit won’t disrupt millions of insurance and derivative contracts and it is still up to firms to take preventive measures, the European Union’s financial services chief said on Thursday.

Valdis Dombrovskis was asked by EU lawmakers whether he could offer EU citizens guarantees that policies they had bought from insurers in Britain would still pay out if there is a hard or no-deal Brexit next March, when Britain is due to leave the European Union.

“I would be somewhat hesitant to give guarantees because negotiations are still ongoing and the outcome is still not 100 percent clear,” Dombrovskis told the European Parliament.

Britain and the EU have agreed on a “standstill” transition period whereby EU rules remain in force in Britain until the end of 2020, which would ensure continuity in cross-border financial contracts like insurance policies and derivatives.

But this transition is part of Britain’s broader EU divorce settlement which is still being negotiated, and won’t be legally watertight until October or later.

The Bank of England has said 82 billion pounds of insurance liabilities involving 48 million policyholders could be affected across Britain and the European Economic Area. Derivatives worth a notional 26 trillion pounds are also caught in the Brexit crosshairs.

Without transition, it would be illegal in some cases to make payouts on insurance contracts or amend derivatives contracts after March.

Insurers in Britain have begun the lengthy legal process of moving blocks of policies to new or expanded hubs in the EU.